Those earning $40,000 a year or less may be eligible for a range of benefits but they must file their tax returns
The Community Financial Counselling Services (CFCS), an organization that helps low-income people file their tax returns. They have been doing this important work for 42 years.
The latest federal budget makes an important commitment to low-income Canadians – to help them complete and file their tax returns. Many might assume this is a way for government to bring in more revenue. In fact, for the large majority of Canadians earning less than $40,000 a year, filing taxes doesn’t mean a bill to pay – it means extra benefits to collect.
This part of the budget, Helping Canadians Receive the Tax Benefits They Deserve, promises that the Canada Revenue Agency (CRA) will contact low-income individuals who have not filed a return, telling them what benefits they may be entitled to.
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We often hear about the impact of poverty and income inequality on health, educational outcomes and child and adult well-being. Might encouraging people to file their taxes help people avoid poor outcomes?
In Sudbury, Ont., Mary, a single parent with two young children, pays $800 a month to rent an apartment and works part time at minimum wage to earn $14,000 a year. By filing her taxes, she can access child benefits, the GST/HST credit, the federal working income tax benefit, the Ontario Trillium Benefit and the Children’s Activity Tax Credit. So she could more than double her income to $31,845. That would raise this family above the poverty line.
Raj, recently widowed in Manitoba, aged 60 and disabled, struggles to live on $7,800 a year in a private apartment. If she files her taxes, she could receive a $674 monthly Allowance for the Survivor benefit since her deceased spouse was over 65. This benefit, as well as other federal and provincial refundable tax credits, would raise her annual income to $19,540, bringing her above the poverty line.
And filing taxes doesn’t just provide additional income.
In Manitoba and Ontario, filing taxes allows some low-income people to access provincial prescription drug coverage. It also allows people with severe disabilities to receive extra tax credits and retirement savings grants.
So why don’t many low-income people file taxes?
Many Canadians have no idea they would get money back. And they fear being told they have to pay the government for back taxes they can’t afford. The CFCS, while accessing $21 million, found the total taxes paid by the 9,000 individuals they saw last year was $169,704. On balance, almost no one owed anything.
Tax filing support is a hugely important anti-poverty and health intervention.
The Canada Revenue Agency supports programs that prepare taxes for low-income Canadians through its Community Volunteer Income Tax Program. But these programs mostly operate in tax filing season, when waits are long and demand exceeds supply. Before 2008, the CRA had more funding, provided more personnel, computers, in-person training and assistance with tax issues to agencies in inner city areas. Many of these programs were forced to scale back or close when the CRA’s funding was cut back.
Tax filing services such as these should be reinstated and extended to serve low-income Canadians throughout the year.
Filing taxes is also often held up by individuals who don’t have the documentation necessary to access certain benefits they may be entitled to. The CRA should work with provincial governments to address this.
It’s time we make sure all low-income Canadians access the benefits they deserve. It is incumbent on the government to make everyone aware of those benefits. The CRA needs to provide strong support to ensure barrier-free tax filing.
Gary Bloch is a family physician with St. Michael’s Hospital in Toronto. He is a founding member of Health Providers Against Poverty.
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